Auto Finance Company Fined $2.75 Million for Distorting Customers' Credit

Auto Finance Company Fined $2.75 Million for Distorting Customers' Credit
August 21, 2014

The Consumer Financial Protection Bureau (CFPB) fined a Texas-based auto finance company $2.75 million for giving incorrect customer information to credit reporting agencies.

First Investors Financial Services Group failed to fix flaws in a computer systems that was providing inaccurate information to credit reporting agencies, potentially harming thousands of its customers. The company became aware of the issue in April 2011, but did nothing to fix the problem and continued reporting wrong information about their customers' payment history, delinquency notices and repossession rates.

First Investors offers auto loans directly to customers or through a car dealership. Since the company services its own loans, it is responsible for supplying account information to credit reporting agencies. The company understated the amounts its customers were paying, such as only counting one payment during a billing cycle, when the customer actually made two. First Investors also overstated how much their customers were overdue on their accounts.

The company also gave incorrect delinquency dates and inflated the number of delinquencies their customers had.

Finally, when customers voluntarily surrendered their cars to make up for missed payments, First Investors listed the surrender as a repossession, which has much more harsh impacts on a credit report than a voluntary surrender.

Along with paying a $2.75 million fine, First Investors was ordered to correct the errors on the incorrect credit reports. They must help customers obtain free copies of their credit reports and establish consumer safeguards.